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Your Credit Score and Your Purchasing Power

Oct 9, 2007
Buying and selling consumer goods and services is the benchmark of today's society. With the exception of the air you breathe, everything you need on a daily basis must be purchased, including clothes, food, transportation, and shelter. Three little digits known as your credit score have a great influence on your ability to purchase these things.

Your score is a numerical summary of your financial history. The number is determined by using an algorithm that takes into account your key issues such as your payment history, the amount of debt you hold, length of your credit history, the amount of credit applications made, and types of credit. Certain actions, such as applying for several types of loans in a short period of time, can have a negative effect on your score, which can range from 300 to 850. The lower your score is, the harder it will be for you to obtain certain services.

At first you might think that your credit score shouldn't have an affect on obtaining services as long as you aren't purchasing something using a loan. Many service providers look at credit in a much different sense. For instance,the electricity company defines credit as extending one month of service to you. Your cellular phone service company considers your one- or two-year contract as a form of credit. Each of these businesses will use your score to decide whether or not to extend these services to you.

A low score could possibly mean that you would be required to pay an additional deposit for services such as utilities and cellular phone service. Worse yet, you could be denied altogether for some services solely based upon your score, even if you have the cash to pay for the service up front. Many landlords will use your credit history as a deciding factor on whether or not to extend a lease to you. Some of these landlords have a minimum credit score requirement. If you fall below this limit you could be turned down for the rental, even if you were going to pay for the entire lease up front.

Certain employers use the credit score as a contingency for employment. An application for employment can be denied if your score is low a set limit.

The same way that a low credit score can shut you out of certain services, a high score can open up possiblities you might not have realized existed. Most individuals who have high scores don't realize the benefits extended to them. For example, a higher score allows you to qualify for platinum credit cards that provide rewards such as cash back and travel rewards. Other advantages to having a high score include lower interest rates and security deposits.
About the Author
Peter Kenny is a writer for Finance 123. Please visit us at Low Interest Credit Cards and Small Business Credit Cards
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